Opinion
1:21-cv-02486 (AJN) (SDA)
11-23-2021
Intelsat Global Sales & Marketing Ltd., Plaintiff, v. Supernet Limited, Defendants.
REPORT AND RECOMMENDATION
STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE ALISON J. NATHAN, UNITED STATES DISTRICT JUDGE:
Currently before the Court is the motion of Plaintiff Intelsat Global Sales &Marketing Ltd. (“Plaintiff” or “Intelsat”) for a default judgment against Defendant Supernet Limited (“Defendant” or “Supernet”). (Pl.'s Mot., ECF No. 16.) For the reasons set forth below, I respectfully recommend that the Court enter judgment against Defendant in the amount of $10,832,090.00, plus late payment interest.
BACKGROUND
A. Established Facts as a Result of Defendants' Default
In light of Defendant's default, the Court accepts Plaintiff's allegations as true, except for those pertaining to damages. See, e.g., Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009).
Intelsat, a limited company incorporated in England and Wales with its primary place of business in London, England, together with its affiliates, operates worldwide by marketing and selling fixed satellite services to media and communications companies, multinational corporations, internet service providers, governments and military organizations. (Compl., ECF No. 1, ¶¶ 4-5.) Supernet is a Pakistan-based satellite network service provider and systems integrator. (Id. ¶ 6.)
Effective August 29, 2011, Intelsat and Supernet entered into a Master Service Agreement (“MSA”). (Compl. ¶¶ 2, 10 & Ex. A.) The MSA provides that “[s]ervice[s] will be provided by Intelsat to [Supernet] on a 24 x 7 basis . . . pursuant to a service order contract . . . which will be governed by the terms of this Agreement.” (MSA § 1.1.) The MSA had an initial term of 12 months, which thereafter would continue “until terminated by either Party on 20 days' written notice, except that the terms of this [MSA] will continue to apply to any Service Order as long as such Service Order remains in effect.” (MSA § 1.3.)
In accordance with the MSA, service order contracts were issued from time to time, under which Supernet purchased specified satellite communication services on the terms and conditions contained in the service order contract, which include the service fees payable by Supernet, the billing method and the payment terms. (Compl. ¶ 12.) The last such contract was Service Order No. 28016 (“Service Order”), Amendment 7, which was duly accepted and signed by Intelsat and Supernet on December 27, 2018. (Id. & Ex. C.) Service Order No. 28016 initially was signed with a term ending on December 31, 2021. (See id.) Through Amendment 7, Supernet extended its transponder services until December 31, 2022, in exchange for a reduction in their rate, which was reduced from $2,500 per MHz per month to $1,900 per MHz per month. (Id. & Ex. B.) Upon signature of Amendment 7, Supernet already owed a debt of $1,397,151.22, which Intelsat agreed that Supernet would clear through a payment plan agreed to between the parties within Amendment 7. (Id.)
By letter dated November 26, 2020, Supernet wrote to Intelsat purporting to terminate its services under the MSA and the Service Order pursuant to Section 1.3 of the MSA. (See Compl. ¶ 13 & Ex. D.) On November 30, 2020, Intelsat responded to Supernet and stated that, while Section 1.3 allowed for termination of the MSA (on 20 days' written notice), the same provision provided that any service order signed previously remains in full force and effect in the case of such termination and the terms of the MSA continue to apply to such service order, such that the termination was not effective for the Service Order, which remained in full force and effect. (Id. ¶ 14 & Ex. E.) The letter also set forth Supernet's outstanding debt of $1,384,340.00 for services rendered and the remaining fees applicable under the Service Order through the agreed service end date, which amounted to $9,447,750.00 as of December 1, 2020. (Id.)
On December 7, 2020, having received no payment or acceptable response from Supernet, Intelsat sent a subsequent letter to Supernet reiterating that the termination of the Service Order was not valid and that Supernet had outstanding debt which then totaled $1,762,250.00 for services through December 31, 2020. (See Compl. ¶ 15 & Ex. F.) Intelsat stated in its December 7 letter that Supernet would owe termination fees of $9,069,840.00 in the case of a termination for non-payment, which Intelsat would seek, along with costs of collection and litigation, should Supernet continue to fail to honor its contractual obligations under the Service Order. (Id.)
The MSA, which continued to apply to the Service Order following termination of the MSA, provides that Intelsat “may terminate . . . any Service Order immediately upon notice to [Supernet] if: (a) [Supernet] does not pay Charges in accordance with Section 4 and such Charges remain unpaid for more than five (5) days after Intelsat notifies [Supernet] of such non-payment.” (MSA § 7.2.) In the event of termination under Section 7.2, the MSA provides that “Intelsat will be entitled to a ‘Termination Fee' equal to the total Charges for the remainder of the service term in the applicable Service Order(s).” (MSA § 7.3.)
Also on December 7, 2020, Intelsat provided formal legal notice through counsel, stating that should Supernet fail to make payment as required, contractual termination fees would be due immediately. (See Compl. ¶ 18 & Ex. G.) The notice further stated that Intelsat was entitled to contractual late payment interest until Intelsat receives full payment, plus all costs and expenses incurred for recovery of the outstanding amount. (Id.) Supernet was advised that, if it failed to make payment with late payment interest by December 15, 2020, appropriate proceedings would be filed for recovery of amounts due and payable, including termination fees. (Id.)
By letter dated December 15, 2020, Intelsat notified Supernet that it remained in material breach of contract, and that Intelsat was officially terminating services under the Service Order as of 19:00 UTC on December 15, 2020, as allowed under MSA Section 7.2. (See Compl. ¶ 19 & Ex. H.) In that letter, Intelsat stated that Supernet had an outstanding amount due of $1,567,199.68 for services up to December 15, 2020 (which was due and payable as of December 1, 2020) (the “Outstanding Amount”), and that following termination, Supernet was liable for full termination fees amounting to $9,264,890.32 (which were due immediately) (the “Termination Fee”), plus applicable late payment interest and costs of collection and litigation. (Id.)
Supernet has not made any payment of the Outstanding Amount, the Termination Fee or the late payment interest. (Compl. ¶ 20.)
B. Procedural History
On March 22. 2021, Plaintiff filed its Complaint asserting breach of contract and turnover claims against Defendant. (See Compl. ¶¶ 23-38.) After having been served with a copy of the Complaint (see Certificates of Service, ECF Nos. 10-1, 10-2, 10-3, 12), the Defendant failed to answer.
On July 14, 2021, the Clerk of Court entered a Certificate of Default against Defendant. (Certificate of Default, ECF No. 15.) On July 21, 2021, Plaintiff filed the instant motion for a default judgment. (See Pl.'s Mot.) On July 23, 2021, Plaintiff served copies of the default judgment motion papers upon Defendant via FedEx International Priority Mail (Jonke Decl., ECF No. 21), but Defendant has failed to respond to the motion.
On November 8, 2021, Judge Nathan referred the default judgment motion to me for a report and recommendation. (Order of Ref., ECF No. 22.)
DISCUSSION
“In the default judgment context, the only issue that usually needs to be decided is whether the plaintiff has provided adequate support for the damages or other relief [it] seeks. However, when entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties.” Bracken v. MH Pillars Inc., 290 F.Supp.3d 258, 261-62 (S.D.N.Y. 2017) (citations and internal quotation marks omitted). In the present case, Plaintiff is a chapter 11 Debtor in a currently-pending bankruptcy case in the United States Bankruptcy Court for the Eastern District of Virginia. (Compl. ¶ 7.) Thus, this Court has subject matter jurisdiction. See 28 U.S.C. § 1334. Also, since Defendant consented to personal jurisdiction in the Southern District of New York pursuant to Section 14.2 of the MSA, personal jurisdiction exists over Defendant. See Ramiro Aviles v. S & P Glob., Inc., 380 F.Supp.3d 221, 258 (S.D.N.Y. 2019) (“[P]arties can consent to personal jurisdiction through forum-selection clauses in contracts.” (citation omitted)).
In addition, the Court finds that service was proper in accordance with Rule 4(f) of the Federal Rules of Civil Procedure and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Convention”). Rule 4(f) permits service “by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the [Hague Convention].” Fed.R.Civ.P. 4(f)(1). As Plaintiff contends, Pakistan and the United States are parties to the Hague Convention. (See Brancato Decl., ECF No. 17, ¶ 6.) In the present case, Plaintiff served Defendant, pursuant to the Hague Convention, at Defendant's Islamabad and Karachi addresses. (See id. ¶ 9.)
The Court next turns its attention to the damages to which Plaintiff is entitled. “Even when a default judgment is warranted based on a party's failure to defend, the allegations in the complaint with respect to the amount of the damages are not deemed true. The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Am. Jewish Comm. v. Berman, No. 15-CV-05983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)), adopted, 2016 WL 4532201 (S.D.N.Y. Aug. 29, 2016). A plaintiff “bears the burden of establishing its entitlement to recovery and thus must substantiate its claim with evidence to prove the extent of its damages.” Id. at *3 (alterations and citation omitted).
Although the Court may hold a hearing to assess damages, a hearing is not required where, as here, a sufficient basis on which to make a calculation exists. See Fed.R.Civ.P. 55(b)(2); see also Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 189 (2d Cir. 2015)). Here, I rely on Plaintiff's sworn declarations to determine whether the requested damages are appropriate.
In its default judgment motion, Plaintiff seeks to recover damages against Defendant under Plaintiff's breach of contract claim. (See Brancato Decl. ¶¶ 21-37.) In order to establish a claim for breach of contract under New York law, a plaintiff must prove, “(1) the existence of a contract between itself and that defendant, (2) performance of the plaintiff's obligations under the contract, (3) breach of the contract, and (4) damages to the plaintiff caused by the defendant's breach.” In re M/V MSC FLAMINIA, 339 F.Supp.3d 185, 241-42 (S.D.N.Y. 2018) (citation omitted). In the present case, a contract existed between Plaintiff and Defendant, and based upon the allegations of the Complaint, Plaintiff has established the elements for a breach of contract claim against Defendant.
The MSA is governed by New York law. (See MSA § 14.1.)
“Under New York law, a successful plaintiff in a breach of contract action is entitled to damages in the ‘amount necessary to put the plaintiff in the same economic position [it] would have been in had the defendant fulfilled [its] contract.'” Am. Jewish Comm., 2016 WL 3365313, at *5 (quoting Scholastic, Inc. v. Snap TV, Inc., No. 09-CV-04349 (GBD) (GWG), 2011 WL 1330246, at *3 (S.D.N.Y. Apr. 8, 2011)). Based upon Plaintiff's submissions, the Court finds that Plaintiff has established that, in order to put it in the same economic position it would have been in absent the breach by Defendant, Plaintiff is entitled to damages from Defendant in the principal amount of $10,832,090.00 (consisting of the Outstanding Amount of $1,567,199.68 plus the Termination Fee of $9,264,890.32). (See Hase Decl., ECF No. 18, ¶¶ 4-8.)
Plaintiff also seeks to recover late payment interest on the Outstanding Amount and the Termination Fee. (See Hase Decl. ¶¶ 10-12.) The MSA provides that “Intelsat is entitled to charge late payment interest at 1.5% per month or the highest rate permitted by law (if less) on any amount not received by Intelsat by the due date, from such due date until Intelsat receives full payment.” (MSA § 4.3.) Under New York law, the “inclusion of a clause directing that interest accrues at a particular rate ‘until the principal is paid' (or words to that effect) alters the general rule that interest on principal is calculated pursuant to New York's statutory interest rate after the . . . the debtor defaults.” See NML Cap. v. Republic of Argentina, 17 N.Y.3d 250, 258-59 (2011). Thus, I find that Plaintiff is entitled to recover late payment interest in the amount of 1.5% per month on the outstanding principal balance. As of July 21, 2021, the date when Plaintiff filed its default judgment motion, Defendant owed $1,241,062.51 in late payment interest on the Outstanding Amount and the Termination Fee. (See Hase Decl. ¶ 10.) Plaintiff also is entitled to further late payment interest in the amount of $162,481.35 per month (i.e., 1.5% of the total unpaid principal amount), due on the first day of the month, until the date of entry of judgment. (Id. ¶ 12.)
Generally, New York law provides for a maximum interest rate of 16% per annum. N.Y. Gen. Oblig. Law § 5-501[1]; N.Y. Banking Law § 14-a(1). However, Plaintiff may recover late penalty interest totaling 18% per annum in this case since Defendant is a corporation and corporations generally may not assert a civil usury defense. N.Y. Gen. Oblig. Law § 5-521(1). In addition, “[t]he civil usury cap does not apply to defaulted obligations.” Madden v. Midland Funding, LLC, 237 F.Supp.3d 130, 140 (S.D.N.Y. 2017) (citation omitted).
CONCLUSION
For the foregoing reasons, I respectfully recommend that the Court enter judgment in favor of Plaintiff against Defendant in the amount of $10,832,090.00, plus late payment interest as set forth above.
Plaintiff promptly shall serve a copy of this Report and Recommendation on the Defendant via FedEx and file proof of service to the docket.
SO ORDERED.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Nathan.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).